Pepe has been a commanding presence at the back in all five of his team's games at the Euros, but complained of muscle pain in his thigh and did not train with his team mates on Monday and Tuesday.
Bruno Alves, who has not played since being sent off in a friendly against England last month, comes in to replace Pepe in one of three Portugal changes.
Midfielder Danilo replaces the suspended William Carvalho and left back Raphael Guerreiro was preferred to Eliseu.
Wales coach Chris Coleman has drafted in Andy King and James Collins in place of suspended duo Aaron Ramsey and Ben Davies.
King, a Premier League title winner with Leicester City last season, has played just 26 minutes at the Euros in two substitute appearances and will line up alongside talisman Gareth Bale in support of striker Hal Robson-Kanu.
The match will be Portugal's fifth European championship semi-final and fourth in the last five editions. Wales are playing in their first major tournament in 58 years and their first ever semi-final.
(Editing by Ed Osmond; editing by xxx)
